[Federal Register Volume 84, Number 112 (Tuesday, June 11, 2019)]
[Notices]
[Pages 27176-27178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12189]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86036; File No. SR-ICC-2019-006]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
ICC's Risk Management Model Description
June 5, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 23, 2019, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
primarily by ICC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
ICC Risk Management Model Description. These revisions do not require
any changes to the ICC Clearing Rules (``Rules'').
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change,
security-based swap submission, or advance notice and discussed any
comments it received on the proposed rule change, security-based swap
submission, or advance notice. The text of these statements may be
examined at the places specified in Item IV below. ICC has prepared
summaries, set forth in sections (A), (B), and (C) below, of the most
significant aspects of these statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICC proposes to revise its Risk Management Model Description.
Specifically, ICC proposes minor, clarifying changes to address
comments received from an independent validation, as well as additional
clean-up changes. The independent validator comments revolve around
clarification updates that do not change ICC's current risk
methodology. ICC believes that such revisions will facilitate the
prompt and accurate clearance and settlement of securities transactions
and derivative agreements, contracts, and transactions for which it is
responsible. The proposed changes are described in detail as follows.
ICC proposes minor changes to the `Initial Margin Methodology'
section to maintain uniformity and provide additional clarity in the
Risk Management Model Description. ICC proposes to update a symbol
representing the portfolio level liquidity charge (``LC'') in an
equation in the `Portfolio Level LC' sub-section to match the symbol
used throughout the document to reference the portfolio level LC.
Moreover, the Risk Management Model Description numbers key equations
so they can be easily referenced. As such, ICC proposes to include a
number corresponding to the equation for the portfolio level LC and to
re-number the equations that follow accordingly. In the `Portfolio
Level Concentration Charge' sub-section, ICC proposes to correct a
typographical error when referencing the portfolio level concentration
charge (``CC''); to update a symbol representing the portfolio level CC
in an equation to match the symbol used throughout the document to
reference the portfolio level CC; and to include a number corresponding
to the equation for the portfolio level CC, re-numbering the equations
that follow accordingly. Additionally, ICC proposes to update a symbol
representing the portfolio level interest rate (``IR'') sensitivity
requirement in an equation in the `IR Sensitivity Risk Analysis' sub-
section to match the symbol used throughout the document to refer to
the portfolio level IR sensitivity requirement. ICC further proposes
updates to the `Portfolio Loss Boundary Condition' sub-section to
replace certain general references to sections with more specific
references to equations in those sections to provide for additional
clarity.
ICC proposes to make such changes effective shortly after filing
with the Commission, on or about May 31, 2019.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act \3\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, and
to the extent applicable, derivative agreements, contracts and
transactions; to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible; and to comply with the provisions of the Act and the rules
and regulations thereunder. ICC believes that the proposed rule change
is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to ICC, in particular, to Section
17(A)(b)(3)(F),\4\ because ICC believes that the proposed rule change
will promote the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and
transactions, and contribute to the safeguarding of securities and
funds associated with security-based swap transactions in ICC's custody
or control, or for which ICC is responsible. The proposed changes to
the Risk Management Model Description to address independent validator
comments provide additional clarity regarding ICC's risk methodology.
The clean-up changes that enhance readability further ensure that the
documentation of ICC's Risk Management Model Description remains up-to-
date, clear, and transparent. ICC believes that having policies and
procedures that clearly and accurately document ICC's risk methodology
and practices are an important component to the effectiveness of ICC's
risk management system, which promotes the prompt and accurate
clearance and settlement of securities transactions, derivatives
agreements, contracts, and transactions and contributes to the
safeguarding of securities and funds associated with security-based
swap transactions in ICC's custody or control, or for which ICC is
responsible. As such, the proposed rule change is designed to promote
the prompt and
[[Page 27177]]
accurate clearance and settlement of securities transactions,
derivatives agreements, contracts, and transactions and to contribute
to the safeguarding of securities and funds associated with security-
based swap transactions in ICC's custody or control, or for which ICC
is responsible within the meaning of Section 17A(b)(3)(F) of the
Act.\5\
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\3\ 15 U.S.C. 78q-1(b)(3)(F).
\4\ Id.
\5\ Id.
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In addition, the proposed rule change is consistent with the
relevant requirements of Rule 17Ad-22.\6\ Rule 17Ad-22(b)(2) \7\
requires ICC to establish, implement, maintain and enforce written
policies and procedures reasonably designed to use margin requirements
to limit its credit exposures to participants under normal market
conditions and use risk-based models and parameters to set margin
requirements and review such margin requirements and the related risk-
based models and parameters at least monthly. The proposed changes
provide additional clarity regarding ICC's risk methodology, including
the calculation of risk requirements, and maintain uniformity in the
document such that ICC's Risk Management Model Description remains up-
to-date, clear, and transparent, thereby improving and promoting ICC's
use of margin requirements to limit its credit exposures to
participants under normal market conditions, consistent with the
requirements of Rule 17Ad-22(b)(2).\8\
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\6\ 17 CFR 240.17Ad-22.
\7\ 17 CFR 240.17Ad-22(b)(2).
\8\ Id.
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Rule 17Ad-22(b)(3) \9\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to maintain sufficient financial resources to withstand, at a
minimum, a default by the two Clearing Participant (``CP'') families to
which it has the largest exposures in extreme but plausible market
conditions. The proposed changes to the Risk Management Model
Description provide further clarity and transparency regarding ICC's
risk methodology and enhance ICC's approach to identifying potential
weaknesses in the risk methodology, thereby ensuring that ICC maintains
sufficient financial resources to withstand, at a minimum, a default by
the two CP families to which it has the largest exposures in extreme
but plausible market conditions, consistent with the requirements of
Rule 17Ad-22(b)(3).\10\
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\9\ 17 CFR 240.17Ad-22(b)(3).
\10\ Id.
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Rule 17Ad-22(d)(8) \11\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to have governance arrangements that are clear and transparent
to fulfill the public interest requirements in Section 17A of the
Act.\12\ ICC's Risk Management Model Description clearly assigns and
documents responsibility and accountability for risk decisions and
requires consultation with or approval from the ICC Board, committees,
or management. Moreover, the proposed updates ensure that the document
remains up-to-date and clear, such that ICC's governance of the
document is clear, transparent, and carried out effectively. These
governance arrangements thus continue to be clear and transparent so
information relating to the assignment of responsibilities for risk
decisions and the requisite involvement of the ICC Board, committees,
and management is clearly documented, consistent with the requirements
of Rule 17Ad-22(d)(8).\13\
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\11\ 17 CFR 240.17Ad-22(d)(8).
\12\ 15 U.S.C. 78q-1.
\13\ 17 CFR 240.17Ad-22(d)(8).
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(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed rule changes would have any
impact, or impose any burden, on competition. The proposed changes to
ICC's Risk Management Model Description will apply uniformly across all
market participants. Therefore, ICC does not believe the proposed rule
changes impose any burden on competition that is inappropriate in
furtherance of the purposes of the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
III. Date of Effectiveness of the Proposed Rule Changee and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act and paragraph (f) of Rule 19b-4 thereunder. At
any time within 60 days of the filing of the proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ICC-2019-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-ICC-2019-006. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filings will also be available for inspection
and copying at the principal office of ICE Clear Credit and on ICE
Clear Credit's website at https://www.theice.com/clear-credit/regulation.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ICC-2019-006 and
[[Page 27178]]
should be submitted on or before July 2, 2019.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12189 Filed 6-10-19; 8:45 am]
BILLING CODE 8011-01-P